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Kestrel owes $2 million to Superior, is behind on payments

Kestrel Aircraft Company CEO Alan Klapmeier speaks during a press conference at the Superior airport in 2012 as Wisconsin Gov. Scott Walker, left, and then-Superior Mayor Bruce Hagen listen. The company owes millions to the state and city and has so far failed to build a manufacturing plant here as promised. Superior Telegram file photo

Kestrel Aircraft is behind on payments to the city of Superior and owes more than $2 million overall on an outstanding loan, Superior Mayor Jim Paine said Thursday.

In 2012, with the promise of 665 local manufacturing jobs on the line, Superior granted a $2.6 million working capital loan to the company, which was started by Cirrus Aircraft co-founder Alan Klapmeier.

None of those jobs materialized; a Wisconsin plant was never built; and in 2015 Kestrel merged with Eclipse Aerospace to form ONE Aviation, which is building planes in New Mexico.

Kestrel failed to make a $368,000 payment on the loan in October 2016, and city officials said they’re assuming that the company won’t be able to make another $368,000 payment that is due Sunday. The outstanding balance on the loan stands at $2,044,000.

“The city of Superior will confer with the city council to determine the future related to the Kestrel loan,” Paine said in a news release Thursday.

The Wisconsin Economic Development Corp. loaned Kestrel $4 million in 2012 and is taking legal action against the company following months of nonpayment, the News Tribune reported Thursday. Douglas County gave the company an additional $500,000 loan.

“WEDC, the city and the county made the investments in Kestrel in an effort to bring hundreds of much-needed jobs to northwestern Wisconsin,” Paine said in Thursday’s news release. “At the time of the awards, the unemployment rate in Douglas County was 7.9 percent.”

Douglas County unemployment sat at 4.5 percent in August.

The city sent a default notice on Nov. 15 last year; the company has not been making payments since October 2016. In December, Kestrel officials met with their public creditors, and not long after WEDC issued default notices on their loans. In May the city, Douglas County and WEDC entered into a forbearance agreement to defer legal action during nonpayment through Aug. 31.

That deadline expired, so the issue may be headed to the courts.

In a WEDC memo obtained by the News Tribune, state officials on Monday told Kestrel that they are "moving forward with legal action against the company" due to "Kestrel's inability to show measurable progress toward obtaining financing."

"We will pursue any and all remedies available to us to protect the state's investment," the memo noted.

Brooks Johnson

Brooks covers business and the economy for the Duluth News Tribune.

(218) 723-5329
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